[An updated version of this article can be found at Political Behavior in the 2nd edition.]
The fact of scarcity, which exists everywhere, guarantees that people will compete for resources. Markets are one way to organize and channel this competition. Politics is another. People use both markets and politics to get resources allocated to the ends they favor. Political activity, however, is startlingly different from voluntary exchange in markets. In a democracy groups can accomplish many things in politics that they could not in the private sector. Some of these are vital to the broader community's welfare, such as control of health-threatening air pollution from myriad sources affecting millions of individuals, or the provision of national defense. Other public-sector actions provide narrow benefits that fall far short of their costs.
In democratic politics, rules typically give a majority coalition power over the entire society. These rules replace the rule of willing consent and voluntary exchange that exists in the marketplace. In politics, people's goals are similar to the goals they have as consumers, producers, and resource suppliers in the private sector, but people participate as voters, politicians, bureaucrats, and lobbyists. In the political system, as in the marketplace, people are sometimes (but not always) selfish. In all cases, they are narrow: how much they know and how much they care about other people's goals are necessarily limited.
A Mother Teresa or an advocate of the homeless, working in the political arena, typically lobbies for a shift of funding to help the poor and the sick. The views of such a person, while admirable, are surely narrow. He or she prefers that the government allocate more resources to meet his or her goals even if it means less for the goals of others who are also lobbying. Similarly, a dedicated professional, such as the director of the National Park Service, however unselfish, pushes strongly for shifting government funds away from other uses and toward expanding and improving the national park system. His priority is to get land and dollars allocated to parks, even if goals espoused by others, such as helping the poor and the sick, necessarily suffer. Those favoring other expenditures—on space exploration, retraining workers, the arts, preventing disease, and defense—feel just as strongly. Passionate demands for funding and for legislative favors (inevitably at the expense of other people's goals) come from every direction.
Political rules determine how these competing demands, which far exceed government's (or even the whole society's) ability to provide, are arbitrated. The rules of the political game are critical. Is the government democratic? Is it a representative democracy? Who can vote? Over what domain of issues can the government make decisions? How much of the society's output is taken for political allocation? The rules provide answers to these questions, influencing not only who gets what from society's product, but also how big the product itself is and how much of it is devoted to influencing the game.
Why do individuals and groups often seek their aims in the political sector rather than in markets? There are several reasons:
For the ordinary citizens who are not politically active, political activity has very different consequences from market activity. Although such citizens benefit from some political action achieved by active groups, they are bound by (and must pay for) all political actions. They are outside the political process except when they vote and when they have concentrated, or special, interests. Dairy farmers, for example, typically know nothing about the costs to them of the space program. However, they are keenly informed about the federal milk program, which restricts milk production and keeps milk prices high.
Small groups whose members inordinately benefit or suffer from proposed legislation are often quite powerful politically. Consider the case of wool and mohair growers in the United States. During World War II military planners found that U.S. wool producers could supply only half the wool wanted by the military. Partly for this reason, and partly to give added income to wool growers, Congress passed the National Wool Act in 1954. Mohair, produced by Angora goats, had no military use but was included as an offshoot of the wool industry. Although wool was removed from the military's list of strategic materials in 1960, the program survives and continues to grow.
Under the Wool Act, growers are given subsidy checks to supplement what they receive in the market for their wool. In 1990 the wool subsidy rate was 127 percent. The farmer who got $1,000 for selling wool in the market also got a $1,270 check from the government. Selling twice as much would have brought a check for $2,540 from the government. The subsidy rate for mohair was a much larger 387 percent. The subsidies are paid for by tariffs on imported wool. The tariffs cause consumers to pay more for imported wool, and also drive up the market price they pay for domestic wool, which is a close substitute. The economy operates less efficiently, since less wool is imported even though the imported wool costs less. The subsidy program, together with the higher price caused by the wool tariff, means that domestic land, labor, and capital resources are applied to the production of wool and mohair instead of more highly valued goods.
Nevertheless, Congress continues to support the program. Thousands of very small checks are sent to small growers in every state. Almost half of the 1990 payments were less than $100. Many of those who receive them are willing to write letters and to vote for those who support the program. Nearly half of the money, though, goes to the 1 percent of the growers who are the largest producers. The largest checks—nearly three hundred of them—averaged $98,000 and accounted for 27 percent of the program's 1990 cost. Recipients of these large checks can be counted on to contribute to organizing costs, and to give campaign donations to members of congressional committees critical to the continuation of the subsidy program. By contrast, because American taxpayers pay only a few dollars per family (Wool Act subsidies were $104 million in 1990), most are unaware of the program and of how their elected representatives voted on it. Even though taxpayers are numerous, and the Wool Act costs them a lot, each taxpayer loses so little that they do not become organized or knowledgeable on the topic. Thus the Wool Act, which harms the interests of the great majority of voters, has survived.
Although such special interest groups are sometimes in line with more general citizen interests, there is little to confine them to general interests. For example, the general public wants national defense, and weapons contractors have an interest in providing the means to obtain defense. But the contractors and the government's military itself will push for far more elaborate means of defense than would a knowledgeable citizen with broader interests.
So although political activity has benefits as well as costs, political behavior causes some predictable problems for citizens in general:
Political activity is often seen as a way to solve problems not handled well by the private sector—everything from pollution problems and national defense to the redistribution of income to the poor. Clearly, private sector results in each of these areas are unsatisfactory to many, and there are massive, growing political programs aimed at each of these goals. But the problems just described reduce the ability of the political system to reach the sought-after goals.
A growing portion of government expenditures is simply to transfer income from the politically disadvantaged to the politically advantaged. In fact, since the early fifties all of the growth in federal spending, as a percentage of GNP, has been in transfer programs. Federal spending for goods and services as a percentage of GNP has been constant. However, only one of every six dollars transferred is in programs that are targeted to low-income people. The rest, such as the very large funding for Social Security and for farm subsidies, goes to members of groups that are politically better organized than most.
Pollution control programs, from the Clean Air and Clean Water acts to the Superfund program, have received great political support. The cost to the economy of environmental programs is generally agreed to be over $100 billion per year. Yet political manipulation of each program is widely recognized to have led to large imperfections in handling these problems. A classic case has been the political uses of the 1977 amendments to the Clean Air Act. Careful policy analysis by Bruce Ackerman and William Hassler has shown that by requiring the use of expensive scrubbers on coalfired power plants, the amendments effectively protected eastern coal interests while harming both the health and the pocket-books of millions of Americans. Robert Crandall of Brookings has shown that the same amendments were used by eastern and midwestern manufacturing interests to stifle competition from new Sunbelt factories.
Bureaucratic performance is also a serious concern. Bureaucracies often can achieve their ends with a "can't do" stance in place of the "can do" attitude that is needed for market success. A perennial case in point is the "Washington Monument strategy" of the National Park Service. At budget time the service frequently threatens to curtail visiting hours at its most popular attraction, the Washington Monument, if its budget request isn't met, and it threatens to blame Congress and the budget process when tourists complain.
It is hard to imagine a private firm, facing hard budget times, curtailing its most popular product or service. The private firm would lose too much business to the competition. But politically controlled agencies are different: they typically are monopolies. One result is that perverse behavior, such as cutting the most valued services first, is a time-honored way to expand a budget.
Political behavior in a democracy has both prospects and problems that differ from those of private, voluntary activity. Political action can force all citizens to comply with decisions made by their elected representatives. Because these political decisions are intended to be for the benefit of all, the support of all is commanded. But because each citizen's ballot is not decisive, voter monitoring of both the intent and the efficiency of political action is not very effective. Voter turnout is often low, and voters, though quite intelligent, are notoriously uninformed. Americans of voting age cannot, on average, even name their congressional representative. Such results are not as strange as they may sound when the impact of political rules on individual incentives is examined.
Richard L. Stroup is an economics professor at Montana State University and senior associate at the Political Economy Research Center, both in Bozeman, Montana. From 1982 to 1984 he was director of the Office of Policy Analysis, U.S. Department of the Interior.
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Crandall, Robert W. "Economic Rents as a Barrier to Deregulation." The Cato Journal 6, no. 1 (Spring/Summer 1986): 186-89.
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Mark Zupan. "An Economic Explanation for the Existence and Nature of Political Ticket Splitting." Journal of Law and Economics 34, issue 2, part I (October 1991): 343-69.